Angel Oak Mortgage, Inc. Fourth Quarter and Fiscal Year 2022 Earnings Supplement Important Notices References in this presentation to "we," "us," "our," "AOMR" and the "Company" refer toAngel Oak Mortgage, Inc., a Maryland corporation, its operating partnership and their subsidiaries; the term "Manager" refers to Falcons I, LLC, our external manager; the term "Añgel Oak Capital" refers to Añgel Oak Capital Advisors, LLC; the term "Añgel Oak refers collectively to Angel Oak Mortgage Solutions, Angel Oak Home ...

Angel Oak Mortgage, Inc. (NYSE:AOMR) Q4 2022 Earnings Conference Call March 9, 2023 8:30 AM ET Company Participants Randy Chrisman - Chief Marketing and Corporate Investor Relations Officer Sreeni Prabhu - CEO Brandon Filson - CFO Namit Sinha - Co-Chief Investment Officer Conference Call Participants Chris Kotowski - Oppenheimer Don Fandetti - Wells Fargo Matthew Howlett - B. Riley Operator Greetings and welcome to Angel Oak Mortgage Fourth Quarter Earnings Call. At this time all participants are in a liste ...

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, reflecting a net loss primarily due to unrealized mortgage portfolio losses [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, reflecting a net loss primarily due to unrealized mortgage portfolio losses Condensed Consolidated Balance Sheet Summary (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$3,305,762** | **$2,577,929** | | Residential mortgage loans (at fair value) | $1,069,476 | $1,061,912 | | Residential mortgage loans in securitization trusts | $1,062,585 | $667,365 | | RMBS (at fair value) | $1,068,672 | $485,634 | | **Total Liabilities** | **$3,040,805** | **$2,086,539** | | Notes payable | $906,321 | $853,408 | | Non-recourse securitization obligation | $1,048,953 | $616,557 | | Due to broker | $1,005,231 | $0 | | **Total Stockholders' Equity** | **$264,957** | **$491,390** | Condensed Consolidated Statements of Operations Summary (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $11,740 | $12,988 | $45,110 | $32,486 | | Total Realized & Unrealized Gains (Losses), Net | $(83,565) | $(323) | $(198,598) | $(3,505) | | Total Operating Expenses | $11,524 | $6,321 | $29,004 | $10,925 | | **Net Income (Loss)** | **$(83,349)** | **$6,344** | **$(179,035)** | **$18,056** | | **Net Income (Loss) Allocable to Common Stockholders** | **$(83,353)** | **$6,340** | **$(179,046)** | **$18,045** | | Basic Earnings (Loss) per Common Share | $(3.40) | $0.25 | $(7.30) | $0.94 | Condensed Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(644,278) | $(883,722) | | Net Cash Provided By (Used In) Investing Activities | $655,093 | $(408,479) | | Net Cash Provided By (Used In) Financing Activities | $(33,620) | $1,298,498 | | **Change in Cash and Restricted Cash** | **$(22,805)** | **$6,297** | [Note 1. Organization and Basis of Presentation](index=10&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) The company operates as a REIT, externally managed by Falcons I, LLC, specializing in acquiring and investing in non-qualified residential mortgage loans - The company is a real estate finance company focused on acquiring and investing in first lien non-qualified residential mortgage (non-QM) loans and other mortgage-related assets[30](index=30&type=chunk) - The company is externally managed by Falcons I, LLC and has elected to be taxed as a Real Estate Investment Trust (REIT) starting from the taxable year ended December 31, 2019[34](index=34&type=chunk) [Note 2. Variable Interest Entities (VIEs)](index=12&type=section&id=Note%202.%20Variable%20Interest%20Entities%20(VIEs)) The company uses VIEs for securitization to obtain non-recourse financing, consolidating their results, which reported a net loss primarily from unrealized mortgage loan losses - The company utilizes VIEs for securitizing whole mortgage loans to obtain long-term non-recourse financing, acting as the primary beneficiary of certain securitization trusts and consolidating their financial results[44](index=44&type=chunk) Assets and Liabilities of Consolidated VIEs (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Residential mortgage loans in securitization trusts - at fair value | $1,062,585 | $667,365 | | Total non-recourse securitization obligations, net | $1,048,953 | $616,557 | - For the nine months ended September 30, 2022, the consolidated VIEs generated a net loss of **$72.6 million**, primarily from a **$152.9 million** unrealized loss on mortgage loans held in the trusts[50](index=50&type=chunk) [Note 3. Residential Mortgage Loans](index=15&type=section&id=Note%203.%20Residential%20Mortgage%20Loans) This note details the residential mortgage loan portfolio, including fair value, unpaid principal balance, weighted average interest rate, and delinquency status Residential Mortgage Loan Portfolio (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Fair Value | $1,069,476 | $1,061,912 | | Unpaid Principal Balance | $1,189,162 | $1,022,461 | | Weighted Average Interest Rate | 4.72% | 4.49% | - As of September 30, 2022, there were **5 mortgage loans 90 or more days past due** and **5 loans in foreclosure**, with a combined recorded investment of **$4.6 million**[57](index=57&type=chunk) [Note 6. Notes Payable](index=18&type=section&id=Note%206.%20Notes%20Payable) This section outlines the company's notes payable, including total facility limits, drawn amounts, and active management of credit facilities and interest rate benchmarks Lines of Credit Summary (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Facility Limit | $1,900,000 | - | | Total Drawn Amount | $906,321 | $853,408 | - The company actively manages its credit facilities, including increasing a facility with Multinational Bank 1 to **$600 million** in August 2022 and transitioning interest rate benchmarks from LIBOR to SOFR across several agreements[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) [Note 8. Securities Sold Under Agreements to Repurchase](index=19&type=section&id=Note%208.%20Securities%20Sold%20Under%20Agreements%20to%20Repurchase) This note details the company's outstanding repurchase agreements, categorized by collateral type, as of September 30, 2022, and December 31, 2021 Repurchase Agreements Outstanding (in thousands) | Collateral | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | RMBS | $67,454 | $360,501 | | U.S. Treasury Bills | $0 | $248,750 | | **Total** | **$67,454** | **$609,251** | [Note 9. Derivative Financial Instruments](index=20&type=section&id=Note%209.%20Derivative%20Financial%20Instruments) The company utilizes derivative instruments, such as interest rate futures and TBAs, as economic hedges to manage interest rate and prepayment risk on its investments - The company uses derivative instruments, including interest rate futures and To-Be-Announced (TBA) securities, as economic hedges to manage interest rate and prepayment risk on its whole loan investments[83](index=83&type=chunk) Notional Exposure of Derivatives (in thousands) | Derivative Type | September 30, 2022 (Short Exposure) | December 31, 2021 (Short Exposure) | | :--- | :--- | :--- | | Interest rate futures | $1,019,600 | $1,043,800 | | TBAs | $1,062,100 | $523,938 | [Note 11. Related Party Transactions](index=25&type=section&id=Note%2011.%20Related%20Party%20Transactions) This note details transactions with related parties, including mortgage loan purchases from affiliates, management fees paid to the external manager, and a severance charge for the former CEO - For the nine months ended September 30, 2022, the company purchased **$567.3 million** in residential mortgage loans from affiliated entities[107](index=107&type=chunk)[108](index=108&type=chunk) - The company pays its external manager a management fee of **1.5% per annum** of the company's Equity (as defined in the Management Agreement), with the manager also entitled to a potential incentive fee[114](index=114&type=chunk)[115](index=115&type=chunk) - A severance charge of approximately **$1.4 million** was recorded in Q3 2022 in connection with the departure of the former Chief Executive Officer and President, Robert Williams[117](index=117&type=chunk) [Note 14. Subsequent Events](index=27&type=section&id=Note%2014.%20Subsequent%20Events) This note discloses significant events occurring after the reporting period, including new repurchase agreements and a declared quarterly dividend - On October 4, 2022, the company entered into master repurchase agreements with two affiliated institutional investors for financing of approximately **$168.7 million**[123](index=123&type=chunk) - On November 8, 2022, the company declared a quarterly dividend of **$0.32 per share** of common stock[124](index=124&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the challenging macroeconomic environment, detailing the net loss from unrealized mark-to-market losses, presenting non-GAAP metrics, and reviewing portfolio composition, securitization, and liquidity [Trends and Recent Developments](index=31&type=section&id=Trends%20and%20Recent%20Developments) This section highlights the challenging macroeconomic environment, including rising interest rates and inflation, which led to significant unrealized losses on the whole loan portfolio, alongside recent loan purchases and securitization activities - The macroeconomic environment in 2022 has been challenging due to sharp increases in interest rates and persistent inflation, leading to heightened recessionary risks[138](index=138&type=chunk) - The Federal Reserve's aggressive rate hikes have widened interest rate spreads, negatively affecting the valuation of the company's whole loan portfolio and making securitization more difficult[139](index=139&type=chunk) - The company's non-QM whole loan portfolio experienced significant unrealized losses due to mark-to-market adjustments, which are reflected in net income, partially offset by realized gains on interest rate futures and TBAs[142](index=142&type=chunk) - During the nine months ended September 30, 2022, the company purchased **$995.2 million** in residential whole loans and completed two securitizations totaling approximately **$722.3 million**[45](index=45&type=chunk)[143](index=143&type=chunk) [Key Financial Metrics (Non-GAAP)](index=33&type=section&id=Key%20Financial%20Metrics) This section presents key non-GAAP financial metrics, including a reconciliation to Distributable Earnings and a comparison of Book Value and Economic Book Value per share Reconciliation to Distributable Earnings (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net income (loss) allocable to common stockholders | $(83,353) | $(179,046) | | Adjustments (Net unrealized losses, non-cash comp, etc.) | $104,195 | $259,986 | | **Distributable Earnings** | **$20,842** | **$80,940** | Book Value and Economic Book Value per Share | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Book value per share of common stock | $10.63 | $19.47 | | Economic book value per share of common stock | $12.94 | $19.52 | [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section analyzes the company's operating results, detailing changes in net interest income, significant net losses from unrealized gains/losses on the mortgage portfolio, and increased operating expenses - For Q3 2022, net interest income was **$11.7 million**, a slight decrease from **$13.0 million** in Q3 2021, as higher interest income from a larger portfolio was offset by significantly higher interest expense[165](index=165&type=chunk) - A net loss of **$83.6 million** from realized and unrealized gains/losses in Q3 2022 was primarily driven by unrealized losses on the mortgage loan portfolio due to widening interest rate spreads[167](index=167&type=chunk)[168](index=168&type=chunk) - Total operating expenses for Q3 2022 were **$11.5 million**, up from **$6.3 million** in Q3 2021, largely due to a **$1.4 million** severance accrual and a **$2.6 million** accelerated stock compensation expense related to the former CEO's departure[170](index=170&type=chunk)[172](index=172&type=chunk) [Portfolio Analysis](index=43&type=section&id=Our%20Portfolio) This section provides a detailed analysis of the company's investment portfolio composition, including fair value, allocated capital, and key characteristics of its residential mortgage loans Portfolio Composition as of September 30, 2022 (Fair Value, in thousands) | Asset Type | Fair Value | Allocated Capital | % of Total Capital | | :--- | :--- | :--- | :--- | | Residential mortgage loans | $1,069,476 | $163,155 | 61.6% | | Residential mortgage loans in securitization trust | $1,062,585 | $13,632 | 5.1% | | RMBS | $1,068,672 | $1,001,218 | 377.9% | | Commercial mortgage loans & CMBS | $18,411 | $18,411 | 6.9% | | **Total Investment Portfolio** | **$3,219,144** | **$1,196,416** | **451.6%** | - The residential mortgage loan portfolio had a weighted average FICO score of **739** and a weighted average loan-to-value (LTV) of **70%** at origination as of September 30, 2022[201](index=201&type=chunk) [Liquidity and Capital Resources](index=57&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity and capital resources, outlining primary financing sources, available borrowing capacity, and the sufficiency of cash to meet obligations - Primary financing sources include payments from the investment portfolio, unused borrowing capacity under loan financing lines and repurchase facilities, and securitizations[250](index=250&type=chunk) - As of September 30, 2022, the company had seven warehouse loan financing lines with an aggregate borrowing capacity of up to **$1.9 billion**[253](index=253&type=chunk) - The company's cash balance decreased during the nine months ended September 30, 2022, primarily due to margin calls on financing facilities, but management believes cash is sufficient to meet liquidity covenants and potential future margin calls[304](index=304&type=chunk)[305](index=305&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the registrant is not required to provide this information[313](index=313&type=chunk) [Item 4. Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[314](index=314&type=chunk) - There were no changes in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[315](index=315&type=chunk) [Part II - Other Information](index=62&type=section&id=Part%20II.%20Other%20Information) This section covers other required information, including legal proceedings, risk factors, and details on unregistered sales of equity securities and use of proceeds [Item 1. Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings requiring disclosure for the period - None[317](index=317&type=chunk) [Item 1A. Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K[317](index=317&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchases under its expired 10b5-1 plan and confirms no unregistered sales of equity securities during the quarter Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 1-31, 2022 | 63,498 | $13.63 | | August 1-31, 2022 | 0 | N/A | | September 1-30, 2022 | 0 | N/A | | **Total** | **63,498** | **$13.63** | - The company's Stock Repurchase Plan expired on July 18, 2022, and has not been renewed, with a total of **706,011 shares** purchased under the plan at an average price of **$16.34**[320](index=320&type=chunk)

Angel Oak Mortgage, Inc. (NYSE:AOMR) Q3 2022 Earnings Conference Call November 8, 2022 8:30 AM ET Company Participants Randy Chrisman - Chief Marketing and Corporate Investor Relations Officer Sreeni Prabhu - Chief Executive Officer Brandon Filson - Chief Financial Officer Namit Sinha - Co-Chief Investment Officer Conference Call Participants Donald Fandetti - Wells Fargo Matthew Howlett - B. Riley Derek Hewett - Bank of America Operator Greetings and welcome to Angel Oak Mortgage Third Quarter Earnings Con ...

Financial Performance - Q3 GAAP Net Income was a loss of ($3.40)/share[8] - Q3 Distributable Earnings were $0.84/share[8] - Q3 Distributable Earnings Return on Average Equity was 26.4%[8, 13] - Book Value per Share declined (27.8%) compared to Q2 2022, primarily due to unrealized mark-to-market losses[9] - Economic Book Value (EBV) declined (19.4%) to $12.94/share versus Q2 2022 EBV of $16.05/share[9] Portfolio Composition - Total Fair Value of Residential Loans was $1.1 Billion with a weighted average coupon of 4.72%[26] - Loans in Securitization Trust totaled $1.175 Billion with a weighted average loan coupon of 4.74%[32] - RMBS Portfolio Total Fair Value was $1.069 Billion with a weighted average coupon of 6.5%[35] Securitization Activity - AOMR closed its fourth post-IPO securitization in July for $184.7 Million with a 5.22% Weighted Average Coupon[22] - The face value of securities sold in the AOMR 2022-4 Securitization was $159.1 Million[24]

Financial Data and Key Metrics Changes - For Q2 2022, the company reported a GAAP net loss of $52.1 million or $2.13 per common share, while distributable earnings were $22.8 million or $0.90 per common share, with a Q2 annualized distributable return on average equity of 23.1% [15][16] - The target asset portfolio increased from $2.7 billion to $3.2 billion, representing a 19% increase [15] - Interest income for the quarter was $29.7 million, a 10% quarter-over-quarter increase [15] - GAAP book value per share decreased to $14.73 from $16.80, a 12.3% decline due to unrealized mark-to-market losses [16] - Economic book value was $16.05 per share, down 8.8% from $17.61 [16] Business Line Data and Key Metrics Changes - The weighted average coupon of loans in the portfolio increased from 4.52% to 4.68% from the end of Q1 to the end of Q2, with new loan purchases in June and July showing coupons of 6.46% and 6.93% respectively [17] - The company purchased $257 million of non-agency mortgages during the quarter [17] Market Data and Key Metrics Changes - The company faced a volatile fixed income market with significant downward pricing pressure on mark-to-market assets, partially offset by an interest rate hedging strategy [10] - The securitization market was extremely limited, but the company successfully executed a $185 million securitization in July [18][19] Company Strategy and Development Direction - The company remains aligned with the Angel Oak Ecosystem, focusing on high-quality non-QM mortgage loans and programmatic securitization to lock in fixed funding costs [8][9] - The management emphasized the importance of strong underwriting and sound liquidity management to navigate market volatility [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by rising interest rates and market dislocation but expressed confidence in the company's ability to adapt and capitalize on opportunities [7][11] - The company aims to continue executing at least one securitization per quarter while monitoring market conditions closely [20] Other Important Information - The company declared a second quarter 2022 dividend of $0.45 per common share, payable on August 31, 2022 [14] - The company repurchased approximately 190,000 common shares for about $3 million through its stock repurchase plan [23] Q&A Session Summary Question: How is the company managing its cash position and future securitizations? - Management is closely monitoring cash and unencumbered assets, indicating a balanced approach to liquidity management while preparing for potential securitization opportunities [28][29] Question: What is the rationale behind the recent securitization structure? - The weighted average cost of funding for the recent securitization was 5.8%, with the average coupon on the loan pool at 5.22%, reflecting the pricing dynamics in the current market [33][34] Question: How does the new economic book value measure differ from GAAP book value? - The economic book value accounts for the fair value of securitization obligations, providing a clearer picture of the company's current value in a rising rate environment [36] Question: What is the company's strategy regarding acquisitions in the current market? - The company is looking to capitalize on high-return loans while maintaining discipline in managing existing securitization pipelines, indicating a cautious yet opportunistic approach [46][47] Question: How is the company positioned in the non-QM market amid industry challenges? - Management believes that the current challenges present an opportunity to increase market share, as some competitors are struggling, allowing the company to solidify its leadership position [44]

Part I - FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited Q1 2022 financial statements reveal a significant increase in total assets to $3.20 billion, a net loss of $43.5 million primarily from unrealized losses, and a decrease in stockholders' equity to $421.4 million [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets grew to $3.20 billion and liabilities to $2.78 billion, primarily from mortgage loans and securitization obligations, leading to a decline in stockholders' equity to $421.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$3,198,201** | **$2,577,929** | | Residential mortgage loans - at fair value | $1,103,773 | $1,061,912 | | Residential mortgage loans in securitization trusts | $1,077,967 | $667,365 | | **Total Liabilities** | **$2,776,765** | **$2,086,539** | | Notes payable | $956,165 | $853,408 | | Non-recourse securitization obligation | $1,031,200 | $616,557 | | **Total Stockholders' Equity** | **$421,436** | **$491,390** | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) For Q1 2022, the company reported a net loss of $43.5 million, a significant shift from $9.5 million net income in Q1 2021, primarily due to $53.8 million in net unrealized losses on mortgage loans and derivatives Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Interest Income | $16,939 | $9,201 | | Total Realized and Unrealized (Losses) Gains, Net | $(53,765) | $2,230 | | Total Operating Expenses | $10,172 | $1,944 | | Net (Loss) Income | $(43,541) | $9,487 | | Basic (Loss) Earnings Per Common Share | $(1.77) | $0.60 | [Condensed Consolidated Statements of Changes in Stockholder(s)' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholder(s)'%20Equity) Stockholders' equity decreased from $491.4 million to $421.4 million in Q1 2022, driven by a net loss of $43.5 million, common stock dividends, and unrealized losses on securities - Key drivers for the decrease in stockholders' equity in Q1 2022 were the **net loss ($43.5 million)**, **common stock dividends ($11.3 million)**, and **unrealized losses on securities ($13.0 million)**[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2022, net cash used in operating activities was $606.4 million, offset by $261.4 million from investing and $388.6 million from financing, resulting in a $43.6 million increase in cash and restricted cash Cash Flow Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(606,423) | $(81,615) | | Net Cash Provided by Investing Activities | $261,363 | $64,060 | | Net Cash Provided by Financing Activities | $388,644 | $15,599 | | **Change in Cash and Restricted Cash** | **$43,584** | **$(1,956)** | [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's focus on non-QM residential mortgage loans, its REIT status, and the consolidation of the $537.6 million AOMT 2022-1 securitization, for which the fair value option was elected for the debt - The company's primary strategy is acquiring and investing in first lien non-qualified residential mortgage ("non-QM") loans, primarily sourced from affiliated lenders[20](index=20&type=chunk) - In Q1 2022, the company securitized approximately **$537.6 million** of residential non-QM mortgage loans through the AOMT 2022-1 transaction, which was consolidated as a VIE where the company is the primary beneficiary[32](index=32&type=chunk)[33](index=33&type=chunk) - The company elected the fair value option for the non-recourse securitization obligation related to the AOMT 2022-1 issuance, a change from previous securitizations[30](index=30&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2022's challenging macroeconomic environment, leading to unrealized losses, while highlighting a portfolio increase to $2.7 billion, $675.6 million in loan purchases, a $537.6 million securitization, and Distributable Earnings of $37.3 million [Trends and Recent Developments](index=28&type=section&id=Trends%20and%20Recent%20Developments) Q1 2022 saw a challenging macroeconomic environment with rising interest rates and widening spreads, causing unrealized losses on the whole loan portfolio, despite the company purchasing $675.6 million in loans and completing a $537.6 million securitization - Rising interest rates and widening credit spreads in Q1 2022 negatively impacted the valuation of the company's whole loan portfolio, resulting in unrealized losses[128](index=128&type=chunk)[129](index=129&type=chunk) - During Q1 2022, the company purchased **$675.6 million** in residential whole loans and completed a new securitization (AOMT 2022-1) with an unpaid principal balance of **$537.6 million**[130](index=130&type=chunk) [Key Financial Metrics](index=30&type=section&id=Key%20Financial%20Metrics) Key metrics for Q1 2022 include Distributable Earnings of $37.3 million, representing a 32.7% annualized return on average equity, and a decline in book value per share to $16.80 Distributable Earnings Reconciliation (in thousands) | Line Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net (loss) income allocable to common stockholder(s) | $(43,545) | $9,483 | | Net unrealized (gains) losses on residential loans | $64,587 | $(2,892) | | Net unrealized (gains) losses on derivatives | $(15,326) | $(1,610) | | **Distributable Earnings** | **$37,293** | **$4,839** | Book Value Per Share | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total stockholders' equity (in thousands) | $421,436 | $491,390 | | Shares outstanding | 25,085,796 | 25,227,328 | | **Book value per share** | **$16.80** | **$19.47** | [Results of Operations](index=32&type=section&id=Results%20of%20Operations) For Q1 2022, the company reported a net loss of $43.5 million, primarily due to $53.8 million in net realized and unrealized losses on mortgage loans, despite an increase in net interest income to $16.9 million and higher operating expenses of $10.2 million - Net interest income increased to **$16.9 million** in Q1 2022 from **$9.2 million** in Q1 2021, driven by a higher average balance of residential mortgage loans[151](index=151&type=chunk) - Total realized and unrealized net losses were **$53.8 million** in Q1 2022, compared to a **$2.2 million** gain in Q1 2021. The loss was primarily due to unrealized losses on residential mortgage loans caused by widening interest rate spreads, partially offset by gains on interest rate futures and TBAs[153](index=153&type=chunk)[154](index=154&type=chunk) - Total operating expenses rose to **$10.2 million** in Q1 2022 from **$1.9 million** in Q1 2021, due to increased public company costs, loan diligence, stock compensation, and **$2.0 million** in securitization costs for AOMT 2022-1[155](index=155&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) [Our Portfolio](index=36&type=section&id=Our%20Portfolio) As of March 31, 2022, the company's total investment portfolio reached $3.1 billion, with target assets of $2.7 billion primarily in residential mortgage loans and RMBS, characterized by a weighted average FICO of 735 and LTV of 70% at origination Portfolio Allocation as of March 31, 2022 (in thousands) | Asset Class | Fair Value | Allocated Capital | % of Total Capital | | :--- | :--- | :--- | :--- | | Residential mortgage loans | $1,103,773 | $148,039 | 35.1% | | Residential mortgage loans in securitization trust | $1,077,967 | $46,767 | 11.1% | | RMBS | $491,287 | $362,732 | 86.1% | | **Total Target Assets** | **$2,703,786** | **$587,866** | **139.5%** | - The residential mortgage loan portfolio as of March 31, 2022, had a weighted average interest rate of **4.52%**, an origination FICO score of **735**, and an origination LTV of **70%**[168](index=168&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by $1.3 billion in loan financing lines ($956.2 million drawn) and repurchase facilities, with the AOMT 2022-1 securitization generating proceeds to repay $458.3 million in debt, and a new $340.0 million repurchase facility entered post-quarter - As of March 31, 2022, the company had six loan financing facilities with a total capacity of **$1.3 billion** and an outstanding balance of **$956.2 million**[221](index=221&type=chunk)[249](index=249&type=chunk) - The company completed the AOMT 2022-1 securitization in February 2022, issuing **$551.8 million** in bonds and using proceeds to repay **$458.3 million** of existing debt[257](index=257&type=chunk) - Subsequent to the quarter end, on April 13, 2022, the company entered into a new **$340.0 million** repurchase facility with Royal Bank of Canada (RBC)[112](index=112&type=chunk)[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Angel Oak Mortgage, Inc. is not required to provide this information - The company is not required to provide quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[269](index=269&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2022. There were no material changes to the company's internal control over financial reporting during the quarter - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[270](index=270&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[271](index=271&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - There are no legal proceedings to report[272](index=272&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the principal risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have occurred to the risk factors disclosed in the Annual Report on Form 10-K[272](index=272&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2022, the company repurchased 179,959 shares of common stock at an average price of $16.67 per share, with approximately $17.3 million remaining available under its $25.0 million repurchase plan Issuer Purchases of Equity Securities (Q1 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2022 | 106,875 | $17.01 | | Feb 2022 | 26,120 | $16.64 | | Mar 2022 | 46,964 | $15.91 | | **Total** | **179,959** | **$16.67** | - The company's stock repurchase plan, initiated in June 2021, authorizes up to **$25.0 million** in share buybacks. As of March 31, 2022, approximately **$17.3 million** remained available under this authorization[274](index=274&type=chunk) [Item 3. Defaults Upon Senior Securities](index=59&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - There were no defaults upon senior securities[276](index=276&type=chunk) [Item 4. Mine Safety Disclosures](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[276](index=276&type=chunk) [Item 5. Other Information](index=59&type=section&id=Item%205.%20Other%20Information) The company reported no other information - There is no other information to report[276](index=276&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including amendments to financing agreements, CEO and CFO certifications, and XBRL data files - The exhibits include amendments to master repurchase agreements with Barclays, Deutsche Bank, and Goldman Sachs, as well as a new master repurchase agreement with Royal Bank of Canada[277](index=277&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as exhibits[277](index=277&type=chunk)

Angel Oak Mortgage, Inc. (NYSE:AOMR) Q1 2022 Earnings Conference Call May 12, 2022 5:00 PM ET Company Participants Randy Chrisman - CMO Robert Williams - CEO Brandon Filson - CFO Namit Sinha - Co-CIO Conference Call Participants Don Fandetti - Wells Fargo Matthew Howlett - B. Riley Chris Kotowski - Oppenheimer & Company Operator Greetings and welcome to the Angel Oak Mortgage, Inc. First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will ...